The new head of the consumer watchdog is seeking to overturn a government proposal for a levy on policy-holders to pay for a new insurance authority.

"It is unfair that the consumers should bear most of the cost," said Consumer Council chairman Professor Wong Yuk-shan.

"I think the charges should be borne by the insurance industry instead," Wong told the South China Morning Post.

"Also, the level of charges should be pegged to the risk of their business - such as the financial stability of an insurance company or the insurance policies it sells - so the charges on insurance companies will vary instead of having a flat rate for all companies.

"Doing so will provide an incentive for the insurance industry to practice prudential management, and to ensure insurance intermediaries comply with the regulations," Wong added.

The planned Independent Insurance Authority, due to be launched in 2015, will replace the current self-regulatory system. Financial Services and the Treasury Bureau said yesterday that it is planning to introduce a bill by the end of this year to set up the authority in 2015.

Under the government proposal, the authority will be self-financed, with income from licence fees paid by insurers and salespeople and from a levy of 0.1 per cent on policy premiums.

In the long term, the levy will account for 70 per cent of the authority's HK$240 million budget, with licence fees providing the rest, according to a public consultation paper released by the bureau last October. The consultation period ended in January.

Wong said he strongly supported having an independent body as it would eliminate any potential conflict of interest.

"In future, the licence fee for an insurance company will jump drastically from the current HK$227,300 to a basic fee of HK$300,000 - plus a variable licence fee of 0.0039 per cent of individual liabilities.

"This can add up to millions of dollars for major insurance companies," he said. Chan said 0.1 per cent of the premium was only a small amount for policy-holders. It would mean an additional HK$10 on a HK$10,000 premium, which most people could afford.

He was also concerned about the amount of power the authority would wield over insurers.

It would be difficult for the industry to make its voice heard if the regulator was dominated by people from outside the sector, he said.

The Consumer Council has received 72 complaints against insurers this year, of which half were about insurance charges, followed by 15 cases involving sales practices.

Wong, who began his three-year term at the Consumer Council in January, has listed seven items on his agenda.

They include building a sustainable consumption culture in Hong Kong instead of simply focusing on value for money, and improving public education on consumers' rights.

"Also, keeping pace with international developments [on consumer issues] and close collaboration with the mainland authority," Wong added.

This article appeared in the South China Morning Post print edition as Scrap new tax, says consumer champion